Consumer Sentiment Soars Despite Ebola Fears

WASHINGTON -- While the appearance of the deadly Ebola virus in Texas is worrying the nation, it has yet to lead Americans to take a more cautious view over how to spend their money, data suggested Friday.

The Thomson Reuters/University of Michigan index of consumer sentiment unexpectedly rose in early October to its highest level since July 2007.

Separate data showed groundbreaking for new homes rose more than expected last month, and taken together the reports pointed to solid U.S. economic growth.

"The underlying strength of the U.S. economy remains intact," said David Berson, an economist at Nationwide Mutual Insurance in Columbus, Ohio. "If it were not for Ebola and geopolitical concerns, these [sentiment] numbers would be higher."

The data for the sentiment survey was collected Sept. 25 to Oct. 15, a period in which Americans have been barraged by news of Ebola's spread in West Africa, where it has killed thousands, and its appearance in the United States.

U.S. officials have confirmed three Ebola cases, all in Dallas, since Sept. 30 -- a Liberian man who later died of the disease and two nurses who had cared for him and are now being treated.

Investors have been concerned that Ebola, if not contained in the United States, could scare consumers and lead them to cut back on spending, though there is little sign of that so far.

The consumer sentiment survey period also overlapped with the global stock market sell-off earlier this week.

Economists polled by Reuters had expected the sentiment index to fall, but instead it ticked two tenths of a point higher to 86.4. Consumers were more upbeat about their personal finances and the national economy.

Other measures of consumer confidence have also failed to show much alarm. Gallup's daily poll of economic sentiment has been stable in recent weeks. At least when it comes to spending decisions, consumers remain focused on a strengthening economy.

The U.S. unemployment rate fell to 5.9 percent last month, a six-year low. Investors think the stronger job market will lead the Federal Reserve to raise interest rates next year after holding them near zero since 2008, though worries about the global economy and chronically low inflation have recently led them to bet the hike would be delayed until late in the year.

Housing starts rose 6.3 percent to an annual 1.02 million-unit pace, the Commerce Department said, the latest sign the sector was continuing to claw back after the implosion that touched off the 2007-2009 financial crisis and recession.

Newly issued permits also rose.

"If you look at the trend, you are still seeing an upward trajectory," said Michelle Meyers, an economist at Bank of America Merrill Lynch (BAC) in New York.

U.S. stock prices jumped following a batch of solid corporate earnings reports, including profits by General Electric (GE) that topped analyst expectations. Share prices had fallen sharply earlier in the week, and the bounceback sucked money away from U.S. government debt, pushing yields higher for a second straight day.

-With additional reporting by Richard Leong and Rodrigo Campos in New York.

10PHOTOS

9 Numbers That'll Tell You How the Economy's Really Doing

See Gallery

Consumer Sentiment Soars Despite Ebola Fears

The gross domestic product measures the level of economic activity within a country. To figure the number, the Bureau of Economic Analysis combines the total consumption of goods and services by private individuals and businesses; the total investment in capital for producing goods and services; the total amount spent and consumed by federal, state, and local government entities; and total net exports. It's important, because it serves as the primary gauge of whether the economy is growing or not. Most economists define a recession as two or more consecutive quarters of shrinking GDP.

The CPI measures current price levels for the goods and services that Americans buy. The Bureau of Labor Statistics collects price data on a basket of different items, ranging from necessities like food, clothing and housing to more discretionary expenses like eating out and entertainment. The resulting figure is then compared to those of previous months to determine the inflation rate, which is used in a variety of ways, including cost-of-living increases for Social Security and other government benefits.

The unemployment rate measures the percentage of workers within the total labor force who don't have a job, but who have looked for work in the past four weeks, and who are available to work. Those temporarily laid off from their jobs are also included as unemployed. Yet as critical as the figure is as a measure of how many people are out of work and therefore suffering financial hardship from a lack of a paycheck, one key item to note about the unemployment rate is that the number does not reflect workers who have stopped looking for work entirely. It's therefore important to look beyond the headline numbers to see whether the overall workforce is growing or shrinking.

The trade deficit measures the difference between the value of a nation's imported and exported goods. When exports exceed imports, a country runs a trade surplus. But in the U.S., imports have exceeded exports consistently for decades. The figure is important as a measure of U.S. competitiveness in the global market, as well as the nation's dependence on foreign countries.

Each month, the Bureau of Economic Analysis measures changes in the total amount of income that the U.S. population earns, as well as the total amount they spend on goods and services. But there's a reason we've combined them on one slide: In addition to being useful statistics separately for gauging Americans' earning power and spending activity, looking at those numbers in combination gives you a sense of how much people are saving for their future.

Consumers play a vital role in powering the overall economy, and so measures of how confident they are about the economy's prospects are important in predicting its future health. The Conference Board does a survey asking consumers to give their assessment of both current and future economic conditions, with questions about business and employment conditions as well as expected future family income.

The health of the housing market is closely tied to the overall direction of the broader economy. The S&P/Case-Shiller Home Price Index, named for economists Karl Case and Robert Shiller, provides a way to measure home prices, allowing comparisons not just across time but also among different markets in cities and regions of the nation. The number is important not just to home builders and home buyers, but to the millions of people with jobs related to housing and construction.

Most economic data provides a backward-looking view of what has already happened to the economy. But the Conference Board's Leading Economic Index attempts to gauge the future. To do so, the index looks at data on employment, manufacturing, home construction, consumer sentiment, and the stock and bond markets to put together a complete picture of expected economic conditions ahead.